Chapter 11
Payroll
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did not pay tax on every paycheque during the year, would otherwise have to pay huge amounts
when they file their tax returns every year.
As a business withholds and remits these statutory deduction amounts to the tax authorities, it
assists in paying for government services provided all year. Examples of these services include
education, medical care, public safety, roads and bridges. Regardless of the level of government that
provides these services, the majority of the funding comes throughout the year from tax remit-
tances.
Canada Pension Plan (CPP)
Every business that is not located in the province of Quebec is required to withhold CPP from an
employee’s gross pay.The business is also required to pay an amount equal to 100% of the amount
withheld from the employee’s pay. For example, if the employee were to have $50 deducted from
her gross pay for CPP, the business would have to pay an additional $50 toward CPP on her behalf.
Most employees must have CPP deducted from their pay. There are a few exceptions; anyone
under the age of 18, over the age of 70, or who is collecting a pension from CPP will not have any
amounts deducted from their gross pay for CPP.
Businesses will only withhold CPP from an employee’s pay until the employee has reached the
specified maximum earnings each year. For 2015, this maximum is $53,600. As an example, this
means that an employee who earns $55,000 in 2015 will have CPP deducted from his pay for
every pay period starting in January until his gross pay for the year reaches $53,600. Any gross pay
received after that will not have any CPP deducted from it. A detailed look at the calculation of
CPP is illustrated in the chapter 11 appendix.
Employment Insurance (EI)
Every business is required to withhold EI from an employee’s gross pay.The business is also required
to pay an amount equal to 140% of the amount withheld from the employee’s pay. For example, if
the employee were to have $50 deducted from her gross pay for EI, the business would have to pay
an additional $70 ($50 x 140%) towards EI on her behalf.
Unlike CPP, there is no age limit restricting employees from paying EI. Thus, anyone who is
working and receiving a paycheque will have EI deducted from their gross pay.
Businesses will only withhold EI from an employee’s pay until the employee has reached the speci-
fied maximum earnings each year. For 2015, this maximum is $49,500.This means that an employee
who earns $55,000 in 2015 will have EI deducted from his pay for every pay period starting in
January until his gross pay for the year reaches $49,500. Any gross pay received after that will not
have any EI deducted from it. A detailed look at the calculation of EI is illustrated in the chapter
11 appendix.
